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Market Intelligence › Basic Terminologies
Oversubscription, the lottery and the mechanism of the retail category
Published by The Retail Trader · AUG 02, 2026 · Market Basics
Most people who apply in an IPO do not know by what rule allotment is made, so they try to improve their chances by applying for more lots. In the retail category, that effort often does not work.
The issue is divided into three major portions — retail, non-institutional and qualified institutional. Each portion has its own method of allotment, and oversubscription in one category does not directly affect another.
In retail, if the issue is oversubscribed, allotment is by lottery, and the unit of the lottery is one lot. That means applying for two lots does not create a chance of getting two lots; it creates a chance of getting a minimum of one lot.
These points are part of the mechanism, not a tip:
• In a heavily oversubscribed issue, the chance of allotment is low by simple arithmetic.
• Different demat accounts under the same PAN are treated as one application.
• The application money is blocked through a mandate, not debited — it is deducted only after allotment.
• A listing gain is not an entitlement; the listing can also come in lower.
Treating an IPO as a listing lottery becomes a behaviour that carries over into the secondary market later. If you like the company, it can be bought after listing too — and then you also have a real price chart.
This article is for education only — it is not a buy or sell recommendation, makes no claim of a guaranteed return, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or the official source.